Great resume, lousy credit

How job seekers with damaged credit can improve their odds

By

JonnelleMarte

For some job seekers, repeated rejection by potential employers may be traceable to an unlikely source: their credit report.

Regulators are cracking down on some of the methods companies are using to screen candidates (two major companies this week were accused of using background checks to discriminate against black applicants.) But employers’ use of credit checks during the hiring process is legal and fairly common. Some 47% of employers conduct credit checks on job candidates, according to a 2012 survey by the Society for Human Resource Management. And one in seven job seekers has been denied work as a result of credit checks, according to a survey by Demos, a liberal think tank.

Potential employers are checking your credit

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Jonnelle Marte discusses how to handle a bad credit history during a job search. Photo: Getty Images.

Employers are more likely to check the credit histories of applicants for positions with financial responsibilities, for senior executive positions and for jobs with access to highly sensitive employee information, according to SHRM. Other companies initiate credit checks when they’re worried about theft and embezzlement, the survey found. “People under financial pressure may not make the best decisions,” says J.T. O’Donnell, chief executive of Careerealism.com, a career-advice and job-search site. Red flags include missed payments, delinquencies, foreclosures and liens. (See also: Best and worst careers to go into debt for.)

So what should job seekers do if they know something on their credit report might raise some eyebrows?

First, applicants should be aware of what information is included in the reports: details of credit card obligations, mortgage debts and car loans, as well as stats on on-time payments, missed payments and duration of account ownership. And even those who are certain they’ve never missed a payments should check their reports for mistakes: one in five consumers has an error in at least one of their three credit reports, according to a study released by the Federal Trade Commission this year. “Some people think they have great credit but maybe there was a mistake or a flaw” that could hinder their job search, says Miriam Salpeter, a job search and social media consultant based in Atlanta.

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Consumers are entitled to three free credit reports a year, one from each of the major credit bureaus, Equifax, Experian and TransUnion, through the government’s site AnnualCreditReport.com. (Employers don’t get access to credit scores, which lenders typically factor in when approving or declining access to credit.) Errors should be reported directly to the credit bureaus. (See also: 10 things credit bureaus won’t say.)

But what if the report is accurate or the dispute has yet to be resolved? Job hunters who are being asked to authorize a credit check—employers must get signed permission before pulling a credit report—should be up front about any issues they know will turn up, says O’Donnell. Without disclosing too many details, job applicants should briefly acknowledge that they might have fallen behind on bills while they were in between jobs or after facing a medical emergency, but should focus on how they are making progress, says O’Donnell.

It may also help to show how you’re working to improve your credit, says Joseph Montanaro, a financial planner with USAA. Make timely payments on any loans and credit cards, even if it is just the minimum amount, he suggests. “If you’re squirreling aside money to make a big payment and falling behind, you could be shooting yourself in the foot,” he says. If possible, people should take on freelance or part-time work while job hunting. And job seekers should be patient if they’re rejected for a few jobs while they’re working to repair their credit: “It’s not an overnight exercise,” says Montanaro.

To be sure, while credit can sometimes be an obstacle, it is rarely the most important factor in the hiring process, career pros say. Employers will put more weight on a person’s previous work experience, if they are a good fit for the job and the company and the candidate’s expertise, according to SHRM. And job seekers should keep in mind that companies don’t normally request a credit check until they’re interested in a candidate, says O’Donnell.

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